An Empirical Analysis of Electricity Regulation on Technical Change in Texas

An Empirical Analysis of Electricity Regulation on Technical Change in Texas
Frank, Mark
2004-10-04 00:00:00
To evaluate the impact of regulation on the innovativeness of firms, this studyconsiders the unusual case of electric utilities in the state of Texas. In the currentera of deregulation, the electric utility industry in Texas is unique because itsregulation was relatively limited until 1975, after which time Texas legislatorsimposed rate-of-return regulation. Utilizing a translog cost framework on annualdata covering the years 1965 to 1985, this study is thus able to compare the rateof technological change both before and after the imposition of rate-of-returnregulation. The findings indicate that before the implementation of rate-of-returnregulation, costs decreased significantly because of technological progress. Afterthe implementation, however, the findings indicate that costs increased significantlydue to technological regress brought on by regulation.
http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.pngReview of Industrial OrganizationSpringer Journalshttp://www.deepdyve.com/lp/springer-journals/an-empirical-analysis-of-electricity-regulation-on-technical-change-in-Xs1pHUPMWM

An Empirical Analysis of Electricity Regulation on Technical Change in Texas

Abstract

To evaluate the impact of regulation on the innovativeness of firms, this studyconsiders the unusual case of electric utilities in the state of Texas. In the currentera of deregulation, the electric utility industry in Texas is unique because itsregulation was relatively limited until 1975, after which time Texas legislatorsimposed rate-of-return regulation. Utilizing a translog cost framework on annualdata covering the years 1965 to 1985, this study is thus able to compare the rateof technological change both before and after the imposition of rate-of-returnregulation. The findings indicate that before the implementation of rate-of-returnregulation, costs decreased significantly because of technological progress. Afterthe implementation, however, the findings indicate that costs increased significantlydue to technological regress brought on by regulation.